Do not push – Newspaper Kommersant No. 6 (7451) dated 01/16/2023

Options to “softly nudge” consumers into what appears to be correct consumer behavior work, but according to a group of university economists in the US, are at the very least irrelevant to consumer welfare, and most likely reduce overall welfare. Nudges reduce dispersion on average, but are also expected to increase consumer choice distortions: the “behavioral economics” in which nudges operate may isolate their overall economic effects.

In a series of publications of the NBER Association at the end of 2022, a preprint of one of the most interesting economic studies of recent times was released. Hunt Olcott of Stanford, along with William Morrison, Daniel Cohen, and Dmitry Taubinsky of the University of California at Berkeley, in “When Does ‘Nudge’ Increase Wealth?” on new, including experimental grounds, they question the effectiveness of one of the most popular tools of modern social engineering – “soft nudge”.

The term “nudges” has been widely popular since the 2010s after the publication in 2008 of the eponymous book by Richard Tyler and Cass Sunstein, in which behavioral finance specialists offered a theoretical justification for the idea of ​​“soft nudge” to certain choices (primarily consumer, but also options, for example, when paying taxes) or limiting options as a more effective way of state regulation and management than direct state regulation, strict prohibitions and interference in the choice. “Nudge” has become an integral part of modern behavioral finance, has gained (in the form of, for example, simplistic and bright recommendatory infographics on consumer products) an excellent reputation in government structures as an alternative to costly and controversial “direct” regulation of consumption. In 2015, Tyler, along with two other consumer finance specialists, Herbert Simon and Daniel Kahneman (the latter is better known as a psychologist at the junction with sociology and economics), won the Nobel Prize – the committee noted the book “Nudges”.

That “soft nudge” is cheaper and better than direct coercion is beyond doubt, it has been confirmed by hundreds of studies – Olcott and his colleagues questioned the broader economic context of this fact in a number of experiments (replicating the design of experiments from popular articles on the topic, associated with the consumption of sugary drinks, the choice of cars and the restriction of choice in taxation – the so-called suboptimal taxes in the United States). The question is, besides the conditionally “positive” effects of the nudge, it is necessary to take into account when assessing its social and economic effect. A particular question that interested researchers was: what happens to the well-being of households whose members are subject to the influence of “nudge”. The authors form a quite interdisciplinary team: a sociologist, specialists in behavioral and public finance and a researcher in the field of green economy, according to publications in the media, rather left-wing economists, for whom a “soft nudge” may be an unacceptable alternative to direct regulation and is in the same circle of ideas as and “libertarian paternalism” and “asymmetric paternalism”.

The results seem to have surprised the authors themselves – their conclusions may seem even milder than follows from the work: “nudge”, for all its effectiveness, not only affects the average choice, but also increases in the general case the scope of distortions, misinterpretations of “nudge” and strengthens its heterogeneity, while the theory requires this technology to reduce the possibility of choice. The authors believe that their data definitely point to a decline in welfare—both general and private—as a result of the “soft nudge.” In the case of the “suboptimal tax choice” in the United States, Olcott and colleagues argue that the “average” results obtained are irrelevant to the overall effect. De facto, the work puts the “nudge” in the general economic context, both Tyler and Kahneman were often criticized for refusing to do so, but no one has yet made direct statements to the Nobel laureates “it works, but it doesn’t work like that”.

Dmitry Butrin